[Click eStock] "SFA, Expected Record High New Orders This Year... Target Price Up"

Samsung Securities Report

[Asia Economy Reporter Minji Lee] Samsung Securities maintained a buy rating on SFA on the 15th and raised the target price to 55,000 KRW from the previous level. This is based on the expectation that new orders will reach a record high this year, centered on secondary batteries.

In the fourth quarter, the company's sales were 453.6 billion KRW, and operating profit was 22.3 billion KRW, significantly below market expectations (operating profit of 56.1 billion KRW). While SFA's standalone segment recorded sales of 253.3 billion KRW and operating profit of 29.8 billion KRW, which were favorable, the consolidated subsidiary SFA Semiconductor segment showed a sharp decline in sales and profits due to the sluggish semiconductor market conditions.

In SFA's standalone segment, the difference in revenue recognition timing at the end of the year with its production subsidiaries also inevitably affected profit adjustments. Researcher Jang Jeong-hoon of Samsung Securities said, "The scale of the adjusted profit arose from the difference in the timing of cost input recognition according to the progress of the production process," adding, "Margins are expected to recover in the first and second quarters of this year."

This year, the company is expected to record the highest-ever annual new orders. As of the end of last year, the order backlog was 964.6 billion KRW, but considering the early January order from Chinese display company Tianma (142.1 billion KRW), the current backlog in January is about 1.2 trillion KRW. Due to continuous capacity expansion by domestic battery companies, the company's new orders in the first quarter are expected to reach a record high of 680 billion KRW. Accordingly, the annual new order volume is predicted to reach 1.58 trillion KRW.

The acquisition effect of CIS, a secondary battery electrode process equipment company, is also anticipated. CIS is expected to be fully consolidated as a subsidiary from the second quarter. Through the acquisition of CIS, the company will include the electrode process, which was previously missing from its secondary battery equipment supply lineup. Researcher Jang Jeong-hoon said, "With the CIS acquisition, the electrode process, which was missing from the secondary battery equipment supply line, will be included," adding, "This makes the company the only equipment supplier capable of covering the entire secondary battery manufacturing line (electrode, assembly, chemical processes)." Considering CIS's order backlog of 580.8 billion KRW at the end of last year, the total order volume is expected to reach 2 trillion KRW even excluding new order opportunities this year.

Researcher Jang emphasized, "The order momentum is likely to be highlighted in the first half of this year," and added, "The current trading level at a PBR of around 1 is the best investment opportunity."